Juicing the Orange was a wonderful book I read in a long time. An economist dabbling with an ad book and writing about one might seem strange but then, are markets not about understanding trends, society, innovation and creativity? The book, written by Pat Fallon, founder of Fallon Worldwide, suggests creative leverage as the solution.
Fallon has used creativity to offer real solutions for many brands. The case of ArcaEX was unique. In 2002, the Securities and Exchange Commission (SEC) approved ArcaEX, as it was then known, as a full-fledged stock exchange so that it could directly compete with the New York Stock Exchange (NYSE) and the Nasdaq. ArcaEX was virtual. It had a visibility disadvantage. By the end of the promotion, 65 per cent of professional traders used ArcaEX. By 2005, the electronic stock exchange technology was accepted by traders. That fall, the 213-year-old NYSE announced hat it would merge with ArcaEX. Creativity overlaps. Just like ArcaEX used it to change the industry, Fallon used creativity to promote the exchange.
Somewhere, creativity was about starting from scratch. It was about relentless reductionism, reducing the problem to a single insight. It got me thinking about creativity. What does creative leverage mean in capital markets? What hampered it all this while? Why don’t we have numerous ideas to make money? Why financial innovations suck? Are the economists really being creative? Or is economics so far from advertising, which is fun? Was creativity not about solutions and fun? In 1997, the California Management Review published a study that investigated how experts in fields ranging from physics to art to business felt about such abstract concepts as wisdom, intelligence and creativity. It was only the business people who tended to believe it was unwise to be creative.
Maybe this is the reason we are so stuck in markets and we can’t have fun while we invest. We just don’t seek creative solutions. I was thinking about metaphors that would define my work as a researcher and money manager. The truth was that we had actually relentlessly reduced the market problem. We were asking the right questions. Why can’t you make money buying losers? Why is performance never secular but cyclical? Why is information more important if it’s already patterned? Why do 90 per cent of investment solutions not beat the market? Why is what we call market, not a right proxy? How can hedging make a profit? Can nature, society and markets be reduced to one pattern?
Just by ranking performers, we have illustrated performance cycles. We have illustrated these cycles on assets and pairs on prior occasions. This time, inspired by the Clint Eastwood Superbowl ad, we decided to test Chrysler search data results on Google Trend and run cycles on Fortune 500 brands. Guess what, the same cycles that work for Indian equity also works for simple search results. The way the best performing asset of today will underperform tomorrow, similarly the best searched variable on Google Trend will fall in search and vice versa. Among Fortune 500 unique brands, 2007 Chrysler was top searched on Google. The respective search variable became the worst in late 2008 and hence saw a rise into 2009 and 2010. Currently, the cycle trend is down (maybe a good time for advertising effectiveness).
The conclusion is that the pattern of cycles in markets is as simple as the one on the web. The same predictive tools that can predict up and down in stock market cycles, connect Superbowl wins and 2012 stock market forecasts can also be used to create a semantic web. Capital markets or non-capital markets, just like creativity, cycles overlap and in the end, we are all snowflakes.
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The author is CMT, and Co-Founder, Orpheus CAPITALS, a global alternative research firm